Penalty enhancement under Rule 96ZP(3) was reduced where duty short-paid was later discharged with interest.

Penalty enhancement under Rule 96ZP(3) was found unjustified where the duty short-paid under Section 3A had already been discharged with interest. The record showed that the assessee had made good the differential duty, the original authority had already considered that compliance while imposing a penalty of Rs. 25,000/-, and the appellate enhancement to a penalty equal to the duty amount was made without recorded reasons. As the default was not deliberate and was linked to financial hardship, and the delayed payment had been compensated by interest, the penalty was reduced to Rs. 50,000/-.

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Issues: Whether enhancement of penalty under Rule 96ZP(3) was justified where the duty short-paid under Section 3A had already been discharged with interest.

Analysis: The appellants had made good the differential duty along with interest. The adjudicating authority had already taken this compliance into account while imposing a penalty of Rs. 25,000/-. The enhancement by the Commissioner (Appeals) to a penalty equal to the duty amount was made without recording reasons. The record also showed that the default was not deliberate and was linked to financial hardship, and the delayed payment had already been compensated by interest. In these circumstances, a penalty equal to the duty amount was held to be unjustified.

Conclusion: The enhancement of penalty was not sustained in full and was reduced to Rs. 50,000/-.

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